The Federal Communications Commission approved the proposed merger of the Bell Atlantic Corporation and the GTE Corporation today, clearing the final obstacle to the creation of the nation's largest telephone company.
The new company, which will be called Verizon once the deal is closed later this month, will control a third of the nation's local telephone market, some 63 million local lines, plus 25 million cell phone customers, in 40 states. It is the latest in a series of mergers and acquisitons that have put the nation's telephone and high-speed Internet system in the hands of a few huge corporations that are planning to offer consumers a variety of services from cable television to cell phone and local and long-distance calling.
Federal regulators say they have approved every deal in the frenzied consolidation of the industry in the hopes that a few telecommunications giants would have the capital and expertise to quickly roll out new technoloiges like high-speed Internet service at affordable prices for consumers.
But consumer groups have raised concerns that the domination of the industry by a handful of colossal companies may ultimately prove costly to consumers and discourage the kind of innovation and price wars that accompany robust competition.
Continue reading the main story''There will be those that will claim this merger brings us closer to a re-emergence of Ma Bell,'' said William E. Kennard, the chairman of the Federal Communications Commission. ''However, my support is predicated on the applicants' enforceable commitments to open traditional local markets to competitors, invest in new markets to competitors, invest in new markets and accelerate deployment of broadband technologies. The end result should produce more competition not less.''
Executives of Bell Atlantic, which dominates the local markets in 13 states from Maine to West Virginia, and GTE, which has operations all over the country, vowed today that, for their current customers, the conditions imposed on the company will yield economies of scale and lower prices, permitting Verizon to offer packages of services - wireless and wired telephone service as well as high-speed Internet - on one bill. Government officials also said that the deal would promote competition both inside and outside of the markets dominated by Bell Atlantic.
''The F.C.C. recognizes that this merger uniquely combines complementary assets that will generate enormous public interest benefits,'' and Ivan G. Seidenberg, chairman and chief executive of Bell Atlantic ''We look forward to creating the next great brand in communications, one that will set the standard for global communications companies.''
But disputing the government and companies, consumer groups warned that the deal, along with other telecommunications mergers, would dampen competition in a field in which many customers already face few choices, higher prices for some services and largely unregulated monopolies. They noted that as a result of this latest deal two companies, Verizon and SBC Communications Inc., would not control 69 percent of the nation's telephone lines.
''Instead of being positioned to compete against each other, six of the eight equal-sized local telephone monopolies have been consolidated into two superregional fortress monopolies, Bell Atlantic and SBC,'' said Gene Kimmelman, co-director of the Washington office of Consumers Union. ''They are virtually insulated from a broad-based competitive threat. With telephone companies merging rather than competing, and cable companies expanding their dominance over television into new high-speed interactive Internet services, the law will not deliver on its promise of broad-based competition and lower prices for consumers.''
The approval of the two-year-old deal had been expected for months, but was delayed as regulators and lawyers for the companies struggled over the issue of permitting the consolidation of a local telephone company, Bell Atlantic, with GTE, which has a huge long-distance Internet business, Genuity. Federal regulations restrict the local company from entering the long-distance business.
The difficulty was that the companies had hoped to keep control of as much as possible of Genuity, a fast-growing Internet business, while government officials and rivals said that such control by the nation's largest local telephone carrier would violate the law. The Telecommunications Act of 1996 provides that a regional Bell company may offer long-distance service only when its local market is sufficiently competitive, a test that Bell Atlantic has satisfied only in New York.
Because of that obstacle, the F.C.C. rejected a series of proposals by the companies that government officials concluded would have given Verizon too much control in Genuity.
Under the plan that was ultimately approved, Verizon will shortly spin off most of its interest in Genuity in a public stock offering, keeping a 9.5 percent interest. Should Verizon manage to open its local telephone markets within the next five years, it would be able to exercise an option to control 80 percent of Genuity.
''In our view, the sticking point was that we wanted a path back to this asset,'' Mr. Seidenberg said in a teleconference with reporters this afternoon. ''The F.C.C.'s interest was sufficient divestiture of control. The commission did what it had to do, and we did what we had to do, and that's how we got to where we are.''
Rivals including AT&T and smaller competitors had sought through months of lobbying to block the merger, and federal officials say they would not be surprised if one of the rivals filed a lawsuit seeking to block the deal.
AT&T, which on Thursday completed its $44 billion acquisition of MediaOne to become the nation's largest cable company, issued a statement tonight that it would review the F.C.C. order before deciding whether to take further action.
Under the order, Verizon will be able to demonstrate that its markets are sufficiently open when it is qualified to offer long-distance service in the 12 remaining states where it is now barred from offering such service.
Mr. Seidenberg said that Verizon planned to seek permision soon to enter the long-distance business in Massachusetts and New Jersey, and Pennsylvania after that. He said the company hoped to be in a position to seek approval to offer long distance in Maryland and Virginia by the middle of next year.
In an effort to promote competition in other regions of the country, the F.C.C. ordered Verizon to enter new markets within three years. If the company fails to meet certain benchmarks, the F.C.C. may penalize the company by the requiring payments to the United States Treasury of up to $750 million.
Antitrust officials at the Justice Department approved the proposed merger last year after the companies agreed to sell one of their two interests in overlapping wireless phone systems in nine states. The divestitures included holdings in Chicago, Houston, Richmond and Tampa, Fla.
Bell Atlantic emerged from the breakup of the old American Telephone and Telegraph Company in 1984 as the local phone monopoly for the mid-Atlantic states. Shortly after the deregulation of the telecommunications industry in 1996, Bell Atlantic acquired the Nynex Corporation, which served most of the region between New York and Maine.
The GTE brand has its genesis in 1935, with the organization of General Telephone and Electric, and two decades later, it shortened its name to GTE.
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